Indo-US Defence Industrial Cooperation: Reaching for the Next Level or a Bridge Too Far?
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Cherian Samuel
Cherian Samuel is Research Fellow in the Strategic Technologies Centre at the Manohar Parrikar Institute for Defence Studies and Analyses. He has written on various cyber security issues, including critical… Continue reading Indo-US Defence Industrial Cooperation: Reaching for the Next Level or a Bridge Too Far? read more
With sundry agreements signed between India and the United States (US) in the recent past, to facilitate defence cooperation, the next ones on the anvil are the Security of Supply Arrangement (SOSA) agreement and the Reciprocal Defense Procurement Agreement (RDPA). Described by a Korean analyst as a Free Trade Agreement (FTA) in defence, getting RDPA through might be a challenge for the two countries.
Defence agreements serve a number of purposes, going beyond the specifics, and in the case of India and US, they have served as milestones, reflecting a deepening strategic partnership aimed at addressing common security challenges and advancing mutual interests. In fact, the very first of the agreements signed over the years, the Indo-US Memorandum of Understanding (MoU) on Technology Transfer, came about when negotiations with the Northrop company for the purchase of the F-5 G Tigershark fighter jet failed in 1981, following the refusal of the company to part with sensitive information on the operational effectiveness of the engine.1 This agreement paved the way for the supply of the General Electric F404 engine for the Light Combat Aircraft. Though the next agreement, the General Security of Military Information Agreement (GSOMIA), facilitating the sharing of military information and classified technologies, was signed in 2002, it was after much opposition from India, since it argued that the Indo-US MoU on Technology Transfer already covered most of the provisions of the GSOMIA.
A Defence Framework was signed in 2005 but US pressure to sign the so-called foundational agreements that would provide the “legal sinews for operational defence co-operation”, was resisted for various reasons. Getting the agreements through has often proved to be a long and laborious exercise, often due to misgivings about their actual utility and apprehensions of unintended consequences. In terms of utility, it was felt that the US would benefit more from these agreements, given the size of its military and its global footprint. To allay these misgivings, many of the recent boilerplate agreements have India-specific clauses and exemptions.2 These were finally signed, though, not all at once, after the renewal of the Defence Framework Agreement in 2015, with the US declaring India a Major Defence Partner in 2016. The first of these was the Logistics Exchange Memorandum of Agreement (LEMOA) for mutual logistics support signed in 2016,3 followed by the Communications Compatibility and Security Agreement (COMCASA) for secure communications interoperability in 2018,4 the Industrial Security Annex (ISA) to the GSOMIA in 2019, and the Basic Exchange Cooperation Agreement (BECA) facilitating the sharing of geospatial information between the two countries in October 2020. Initial analyses following these agreements have extolled their benefits, particularly in the areas of “interoperability, making arms transfers easier and paving the way for improved cooperation on innovation and production”.5 However, in general, it is difficult to make a tangible assessment of their benefits.
Next on the anvil are the Security of Supply Arrangement (SOSA) agreement and the Reciprocal Defense Procurement Agreement (RDPA). Whilst the earlier agreements primarily facilitated interoperability, these agreements streamline defence commerce between the two countries, making it easier for private companies in the two countries to bid for each other’s defence contracts.
The signing of SOSA and RDPA was initially proposed in June 2023 by the United States Secretary of Defense, Lloyd Austin, during his visit to India. This proposal was part of a new roadmap aimed at strengthening defence industrial cooperation between the United States and India.6 This was subsequently reiterated in the Joint Statement following Prime Minister Modi’s visit to Washington in the same month. 7 Subsequently, the US government issued notice in the Federal Register in October 2023 and sought feedback from the defence industry community about their experience in participation in “public defence procurement conducted by or on behalf of the Indian Ministry of Defence”.8 The Indian Ministry of Defence is also soliciting similar feedback.9
For the foreign companies to be able to sell to the United States, their respective governments should have concluded an RDPA, as required under Defense Federal Acquisition Regulation Supplement (DFARS) Pt. 225.10 The US has signed these agreements with 28 countries, many of them, close allies and partners, though with “varying scope, enforce ability, and reciprocity”.11 The US is currently going through a similar process with South Korea, with the Department of Defense (DoD) issuing notice on 23 February 2024.12 According to one account, discussions on the RDPA have been going on with South Korea since the mid-1980s, however, the Koreans are reluctant to sign as they fear that their defence industrial base would be adversely impacted by the onslaught of American equipment given that the RDPA calls for full reciprocal access to the defence procurement market.13 However, of late, there is a perception that the RDPA would be beneficial for joint development and production of advanced defence technologies and platforms. The example given is of Japan which, subsequent to the signing of an RDPA, has seen an uptick in collaboration between US and Japanese companies. Another benefit is that the RDPA provides an exemption to the Buy American Act which has made it mandatory for goods bought with federal funds to contain 75 per cent domestic content by 2029.14 Offers of evaluation of qualifying country end products are also carried out without applying the price differentials otherwise required by the Buy American statute and the Balance of Payments Program.15
Setting the positives aside, negotiating an RDPA will be a long and arduous process, a fact highlighted even by American officials.16 Its description as an “FTA for defence” only serves to underscore this point. Differences in procurement procedures in the respective countries would make the stated goals of ensuring transparency, fairness and reciprocity in defence procurements difficult to achieve in practice. Among the many issues that would come within the scope of the negotiations are the scope and coverage of the RDPA with regard to R&D and seeking exemptions from certain US procurement rules.
Even after the RDPA is signed, Indian contractors and sub-contractors will have to deal with the complex rules and regulations within the US defence procurement system. For instance, these regulations include several sections that outline the obligations of DoD contractors regarding the storage, transmission and processing of “controlled information”, which refers to sensitive information with military applications. A significant portion of the DFARS rules on cybersecurity deals with the disclosure of data breaches, requiring contractors to report the type of incident and the malicious programs or tactics used. This is because defence contractors are prime targets for cyber criminals.17
These requirements cover a wide range of areas, such as limiting access to data, implementing audit controls, maintaining baseline configurations and configuration management of software and hardware, enforcing robust identity and access management (IAM), ensuring physical security of the workplace, and maintaining the integrity of personnel.
Meeting the DFARS requirements necessitates expertise in technical and security administration areas. Non-compliance can result in financial penalties and permanent disbarment. Additionally, contractors must now be CMMC (Cybersecurity Maturity Model Certification) certified, with renewals required every three years. The CMMC is the standard the DoD uses to verify that companies meet cybersecurity requirements before being awarded contracts. The DFARS requirements pose significant challenges for companies, especially small and medium-sized contractors.18 Even American Industry associations have highlighted the lack of clarity around DFARS and CMMC, as well as the additional expenses that contractors must incur to bring their organisations up to the required specifications.19
While the potential benefits of the RDPA are substantial, including improved interoperability, technological advancements and economic growth, the path to its realisation is not without obstacles. Differences in procurement procedures, compliance with complex US regulations such as DFARS and CMMC, and concerns over potential impact on domestic defence industries will all need to be carefully addressed during the negotiation process. Successful implementation of the RDPA will require a deep understanding of the nuances and requirements of both the US and Indian defence procurement systems. Effective collaboration between the defence industries of the two nations will depend on their ability to navigate the regulatory landscape. This, in turn, would be critical to realising the full potential of these agreements.
Views expressed are of the author and do not necessarily reflect the views of the Manohar Parrikar IDSA or of the Government of India.